From April 2017 new rules will be introduced to determine domicile status for individuals for income tax, capital gains tax and inheritance tax (IHT). These new rules will fundamentally change the way in which some non UK domiciled individuals (non-doms) are taxed in the UK.
With such significant changes and the likelihood of a relatively short window before the new rules take effect, if you are a non-dom now is the time to ensure you understand your future tax position.
So what is proposed?
- Once an individual has been UK resident for all or part of 15 out of the preceding 20 tax years they will be deemed UK domiciled for all tax purposes from the beginning of the 16th tax year.
- An individual will be able to restart the deemed UK domiciled clock once they have been non-UK resident for six or more complete consecutive tax years.
- Once deemed UK domiciled, the remittance basis of taxation will no longer be available.
Example: A, who is of French domicile, arrived in the UK in the 2002/03 tax year and has been UK resident since. He claims the remittance basis and currently pays the remittance basis charge of £60,000 (from 6 April 2015 onwards) per annum. In the UK he is only taxed on his UK source income and gains, any offshore income and gains only being taxed if they are remitted to the UK. Only his UK assets are within his estate for UK IHT.
Under the proposed new rules A will become deemed UK domiciled for all taxes from 6 April 2017 with all of his worldwide assets being within the UK IHT net and worldwide income and gains taxed in the UK as they arise.
Additional changes will apply to those individuals who are born in the UK with a UK domicile of origin but who have acquired a domicile of choice elsewhere. From April 2017, if they return to the UK, such individuals will be treated as UK domiciled for all tax purposes while they are resident in the UK.
There are also new rules from non-doms holding UK residential property – see Non-Doms and Residential Property.
If you would like any further information please contact Sue Stephens.